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HISTORY OF
MICROTRANSACTIONS
EARLY USES
The first use of Micro-Transactions was in developer Bethesda's 2006 game The Elder Scrolls IV: Oblivion in the form of armour players could purchase for their in-game virtual horse for a price of £2. The armour granted the player no gameplay benefits, just a visual upgrade for their horse.
Microsoft originally wanted to implement a Micro-Transaction system to the xbox marketplace in 2005. Microsoft saw it as an opportunity for players to purchase only items that they wanted for £1 to £5, not spend £20 or £15 for bundles of content.
Microsoft implemented micro-transactions into games such as Perfect Dark Zero and Project Gotham Racing. Offering things such as New Maps and Cars for players to use. These early micro-transactions did not take off in any way but were a proof of concept from microsoft to other game developers that the system could work.
Bethesda received criticism from fans of Oblivion on the implementation of micro-transactions. The criticism did not effect Bethesda's sales, placing the horse armour in the top 10 most purchased items on the Xbox Live Marketplace. Fans also purchased houses for their in-game characters. Micro Transactions have become increasingly popular, especially in smartphone games, where developers have taken on the business model of making their games free to download, making profit by players purchasing in game items.
LOOT BOXES
Many modern games have implemented a 'Loot Box' system, where players can purchase in game 'boxes' and open them. In the boxes are items that the player can use such as character outfits and cosmetic items for characters in the game. Recently, this system has been criticised, with many people claiming that the system promotes gambling to young people and children. People are stating a preference for directly purchasing the items they want in the game, instead of receiving the random items from the loot boxes.
Lootboxes were first introduces to Japanese and Korean multiplayer games. The first western implementation of loot boxes was in Valve's Team Fortress 2 in 2011, with the company making the once £40 game free-to-play, with the game's income coming from the loot boxes. In China and Korea, the governments have noted the business model as a form of unregulated gambling. The Ministry of Culture in China made laws in 2016 forcing all game companies to disclose the odds of specific items in the loot-boxes in their games. In 2017, Belgium's Gaming Commission called for the banning of loot-boxes, believing they are a form of unregulated gambling.
An example of this is the use of 'Cases' in Counter Strike: Global Offensive. Players purchase crates and 'keys' to open the crates with real money. Once opened, the player is shown a visual of the weapon skins they could win scrolling past and eventually landing on the item they have won, almost like a slot machine. In the game, the weapons are graded Battle-Scarred, Well-worn, Field-Tested, Minimal-Wear and Factory-New, with the Factory New weapons being the rarest and Battle-Scarred being the most common. Players can then either keep the item, or sell it on the game's marketplace. The rarer skins and items can sell for thousands of pounds, whilst the common items can sell for just pennies. This is because the rarer items have a 0.4% drop rate, whilst the more common Battle Scarred items have a drop rate of 78.70%, meaning that you could open over 1000 cases, costing £3 each and only receive around 1 Factory new item. Valve, the developer and publisher of Global Offensive made the loot box system this way to ensure players persistently purchase the crates in the hopes of receiving the rarer items.
COUNTER-STRIKE
GAMBLING SCANDAL
Once players received their items won through the loot box system in Counter Strike: Global Offensive, they could keep the item, sell it on the game's marketplace or sell it on third-party sites such as Ebay for real money. Another option was to gamble the items on third-party sites in hopes of receiving more items in return and making a profit on their investment.
These sites were promoted by professional Counter Strike players, Youtubers and Live Streamers who played the game. The sites would pay them to make a video of them using the site, by placing their in-game items in the 'prize pool' and receiving prizes of items worth over 5x their original investment. This was because the sites were fixing the odds of the bets in the promoters favour, which was not disclosed to the audience of the promoter.
Trevor Martin and Tom Cassell, both youtubers with over 17 million subscribers between them were promoting the gambling site CSGO Lotto in July 2016, claiming that they were not paid by the site in any way to promote it, and also claiming they were winning up to $13,000 dollars worth of in-game items a time. People began to look into the site and discovered that Trevor Martin was the founder and director of the site and Tom Cassell was the vice-president of the site. The two made video's explaining the situation and apologising for their actions. Two Class action lawsuits were filed against them, one by a mother who's son was a minor using the site. She alleged that her son had lost a significant amount of money using the sites.
After this, the site was closed down, along with other sites that had been using promoters to entice people into using the sites. The sites were seen as controversial as they had no regulations and are not considered gambling sites under any laws. Meaning whereas minors cannot use traditional gambling sites, they could use these gambling sites freely.
In the UK, skin gambling is seen as equivalent to traditional cash gambling, causing UK-based Counter Strike gambling sites to be shut down.
RECENT USES
Larger game studios adapted to using more micro transactions in their games. Companies like Rockstar Games, the developer of Grand Theft Auto 5 use micro-transactions in their games. Grand Theft Auto 5 is the most profitable entertainment product of all time, selling 90 million copies and generating over $6 Billion in revenue. The game generated more revenue through micro transactions than retail sales by the end of 2017. EA, the developer of games such as Fifa, Battlefield and the Sims reported that from the 1st of April 2016 to the 31st of March 2017, the company made over $1.279 Billion through micro transactions and game 'season passes'.
Many game publishers use the season pass model as a way for players to purchase micro transactions and downloadable content for their games. First implemented by Rockstar Games in 2011 for their game, LA Noire, originating from the concept of a season ticket. Instead of paying full price for each content pack, the player can purchase a 'season pass', for one set price. This is so the player pays less for one lump some of content instead of paying individually for each content pack for the game. The Call of Duty franchise uses this system in each of its games. Micro Transactions have been seen as anti-consumer, and are seen as psychologically pressuring the player into purchasing it to spend more money.
SOURCES:
Wikipedia:
https://en.wikipedia.org/wiki/Microtransaction
Polygon:
https://www.polygon.com/2016/7/4/12093546/csgo-lotto-tmartn-syndicate-youtube-disclosure
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